Get closer to the supply chain, get closer to business success
Virtual Community Networks were one of the emerging trends at last year's Orange Business Live. Where it was once enough to sell to customers based on a perception of value that was product-centric and delivered to undifferentiated customers, businesses now need to get closer to those customers by collaborating directly with the supply chain to deliver the single customer experience.
Ubiquitous connectivity makes it possible to be continuously linked to the supply chain so that real-time collaboration is possible that streamlines business processes and also affords cost efficiencies. This development has been speeded along by social networking, although social networks are commonly constructed on the public Internet where users know and accept the security and privacy risks.
Secure the borders and forecast demand
In the enterprise, security must be harmonized between partners and suppliers so that information that would normally only be accessible by internal staff is made available safely to third parties. All devices on the network must comply with corporate security policies if the security perimeter is to be extended to include trusted third parties.
Once this is achieved, the business can shorten time-to-market, reduce inventories and the costs associated with maintaining them, and minimize order fulfillment cycle times. This is achieved by joint planning and collaboration between the company and its suppliers where demand forecasting, information sharing and coordinated shipping are optimized to result in increased availability to the customer, while reducing inventory, transportation and logistics costs.
One of the biggest developments in recent months has been building the flexibility into the supply chain to allow customers to personalize a product the way they want it before it is delivered. And that depends in no small part on instant contact between the supply chain and the enterprise. Without the speed to react to dynamic changes in the market and keep up with these personalized customer demands, so the logic runs, businesses are lost.
One of the more interesting developments in collaboration between virtual communities is to allow companies to share transport. Given the green credentials on offer for firms that participate, it could be the way of the future. Firms can share logistical information that allows them to share a truck that's going to a destination both firms deliver to, or they can piggyback a truckload that's going in approximately the right direction, gaining cost savings en-route. Another practical application comes from the food industry, where traceability is facilitated by collaboration among the supply chain that can save lives if infected meat is accidentally distributed.
As firms continue to deal with the recessionary cold, their businesses could heat up a bit if they can master running longer supply chains. Outsourcing production to overseas territories in order to save on production costs has lengthened the time it takes to make products, particularly in the manufacturing industry. Globalization has amplified the risks in extended supply chains, and so in order to stay on top of changes, companies are looking at event management technology to alert them to any changes and build in a buffer of time to find either alternative suppliers or products.
Challenges of accelerated globalization
The discipline of Collaborative Planning, Forecasting and Replenishment (CPFR) is the natural evolution of this approach, and calls for feedback systems that monitor delivery, and systems that capture and manage demand and supply information between parties.
The mastery of CPFR can translate into reduced operational costs, an increased ability for the enterprise to react to a dynamic market, while suppliers help to improve new product design. But where to start?
Analyst firm Gartner thinks it has the answer by applying the same sort of analysis normally applied to social networking communities in business community networks. Gartner says that if business leaders can evaluate the information flows between contacts, define which of them create economic value, and which individuals or entities are the most influential, then patterns emerge that can be exploited.
According to a recent PRTM Management Consultancy survey of 300 leading global firms, 42% of all manufacturing activities and 38% of final assembly have been globalized, leading to a need for greater flexibility to deal with structural shifts in the supply chain. However, despite an average 17% cost reduction gained through globalization, in terms of production, can be outbalanced by a lack control over the costs of managing a global supply chain. Customers in local markets still expect top quality products, and yet the majority of companies in the survey said they experienced quality control issues, with about one-fifth saying that the issues were frequent and serious.
With these statistics prevalent, many enterprises will be focused in 2010 on scoping out effective lines of communication with their supply chain through teleconferencing, telepresence and Web-conferencing, designed to iron out the wrinkles and maximize the cost efficiencies of virtual communities.